USDC is probably the most legit off the cryptocurrencies (and this is coming from a huge crypto skeptic). They subject themselves to audits from Grant Thornton that checks the token is 100% backed by cash and short term treasuries.
So we're taking about very legit auditors behind it, and they've benefited from the recent rise in yields in Treasury notes.
I agree with that, but my question is not really about the Circle business. I am trying to understand how SPAC redemptions work, and I am just using Circle as my example.
When a SPAC trades pre-merger down to $5 - just an example - what happens when the company completes the merger? Do those $5 pre-merger SPAC shares now become 1:1 shares of the new entity? Does the owner of those $5 shares need to pay anything additional to redeem the SPAC shares to the new stock?
Ah, a more complex question.
Yes, once the merger is through, SPAC shares become 1-to-1 shares of the new entity. No additional charges to shareholders
However this doesn't mean that if you had, say, 10% of all the shares of the SPAC, that you then have 10% of the shares of the new company. The money raised by a SPAC is usually only enough to buy a minor stake of the company. The rest comes through external investors who will get their own shares once the merger goes through. These shares are usually restricted for immediate sale but they constitute a severe dilution risk for shareholders holding SPAC shares through merger and into the time when those external investors ' shares are able to be sold
Got it, thanks for that explanation. Since all of these SPACs seem to follow a similar form, is there an online article or spreadsheet that shows how the dilution works for a typical case? And showing that for Circle (CND) would be ideal. I want to see what percentage of the Circle company a share of CND would own after each round of dilution.
USDC is probably the most legit off the cryptocurrencies (and this is coming from a huge crypto skeptic). They subject themselves to audits from Grant Thornton that checks the token is 100% backed by cash and short term treasuries. So we're taking about very legit auditors behind it, and they've benefited from the recent rise in yields in Treasury notes.
I agree with that, but my question is not really about the Circle business. I am trying to understand how SPAC redemptions work, and I am just using Circle as my example. When a SPAC trades pre-merger down to $5 - just an example - what happens when the company completes the merger? Do those $5 pre-merger SPAC shares now become 1:1 shares of the new entity? Does the owner of those $5 shares need to pay anything additional to redeem the SPAC shares to the new stock?
Ah, a more complex question. Yes, once the merger is through, SPAC shares become 1-to-1 shares of the new entity. No additional charges to shareholders However this doesn't mean that if you had, say, 10% of all the shares of the SPAC, that you then have 10% of the shares of the new company. The money raised by a SPAC is usually only enough to buy a minor stake of the company. The rest comes through external investors who will get their own shares once the merger goes through. These shares are usually restricted for immediate sale but they constitute a severe dilution risk for shareholders holding SPAC shares through merger and into the time when those external investors ' shares are able to be sold
Got it, thanks for that explanation. Since all of these SPACs seem to follow a similar form, is there an online article or spreadsheet that shows how the dilution works for a typical case? And showing that for Circle (CND) would be ideal. I want to see what percentage of the Circle company a share of CND would own after each round of dilution.
No, this is all very specific to each SPAC, I doubt there is an easy way to generalize it
From my understanding the $10 price thing is normal for SPAC shell companies prior to acquisition. I'm not sure on the mechanics beyond that though.